The abolition of fuel subsidy system has not only made consumers vulnerable to fluctuation of global crude oil prices but also led to the volatility in the ringgit as many will discover at petrol pumps tomorrow.
While the government is only expected to announce the official fuel retail prices for March tonight, PKR secretary-general Rafizi Ramli has warned that it will be significantly higher.
Rafizi said the marginal increase in global crude oil price is made worse by the weak ringgit which is in part caused by the more than RM40 billion debt woes plaguing government-owned 1Malaysia Development Berhad (1MDB).
“The currency market sentiment is anxious about 1MDB’s debt which has largely contributed to the reluctance of international investors to hold the ringgit currency, causing its value to continually fall against the US dollar,” he said in a statement today.
Rafizi said under the administration of Prime Minister Najib Abdul Razak, the ringgit’s value had fallen to the worst level since the 1998 Asian financial crisis.
“If Najib blamed the global crude oil market for fluctuation in fuel prices, he should be fully responsible for the fluctuation of the ringgit’s value.
“The increase in petrol and diesel price in the coming months that the rakyat must bear is a result of his failure as prime minister and finance minister,” said Rafizi.
Rafizi Ramli
1MDB is owned by the Finance Ministry which Najib heads, and he is also the chairperson of the company’s advisory board.
The country is now using a managed float system where the average price of oil for the current month is used as a benchmark to determine the following month’s fuel retail price.
“The increase or decline of the ringgit has a direct impact on the price of fuel which the rakyat must pay.
“This causes hardship to the rakyat as the fall in oil price beginning in September 2014 is accompanied by a fall in the value of the ringgit against the US dollar.
“The value of the ringgit which, is now being traded at a rate of RM3.60 for every US$1, has declined by 10 percent in six months when it was valued at RM3.30 to US$1,” said Rafizi.
Double whammy for fuel consumers
As such, he said the slight recovery in oil price coupled with the weak ringgit will be a double whammy for fuel consumers starting tomorrow.
According to Means of Platts Singapore (Mops) calculation formula, Rafizi estimated the price of RON95 will increase by 21 sen to RM1.91 per litre while diesel will likely see a hike of 16 sen to RM1.86 per litre.
He also reiterated that the government had collected RM1.148 billion in fuel tax when Malaysia was still under the previous fuel system up to January.
Up until then, the dramatic crash of the global crude oil price had dragged the market fuel price to below the fixed and higher retail price the rakyat was paying for.
As such, Rafizi said the government should use this amount to subsidise next month’s fuel retail price to lessen the rakyat’s burden of having to deal with a double whammy.
“I urge the federal government to use this tax reserve it quietly collected to avoid a drastic increase in the price of RON95 and diesel,” he said.
He added that the move will help to mitigate the increase of the RON95 price to only RM1.80 per litre.
Oil price per barrel in USD:
Value of the Ringgit against USD:
- M'kini
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